Goldman Sachs hit with record $350m fine for 1MDB failings

Goldman Sachs ignored a series of ‘red flags’ in connection with 1MDB, according to the Hong Kong markets watchdog.
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Updated 23 October 2020

Goldman Sachs hit with record $350m fine for 1MDB failings

  • Hong Kong watchdog accuses investment bank of ‘serious lapses and deficiencies’ over $2.6bn wealth fund scandal

HONG KONG: Hong Kong’s markets watchdog on Thursday fined Goldman Sachs’s Asian business $350 million for its role in Malaysia’s multibillion-dollar 1MDB scandal, the largest single fine ever levied by the regulator in the Asian financial hub.

The Securities and Futures Commission (SFC) said serious lapses and deficiencies in management controls at Goldman Sachs (Asia) had contributed to the misappropriation of $2.6 billion raised by the Malaysian sovereign wealth fund.

1Malaysia Development Berhad (1MDB) raised the funds in three bond offerings in 2012 and 2013.

A Goldman Sachs spokesman said the Wall Street bank would issue a statement in due course.

The 1MDB scandal has been a costly and long-running sore for the US investment bank.

In July, Goldman agreed to pay $3.9 billion to settle Malaysia’s criminal probe and this week it is expected to agree to pay more than $2 billion to settle US charges over its role in the scandal.

FASTFACT

$4.5 Billion

Malaysian and US authorities estimate $4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe.

Malaysian and US authorities estimate $4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe and implicated high-level officials in the fund, former Malaysian Prime Minister Najib Razak, Goldman staff and others.

The three bond offerings, which raised a combined $6.5 billion, were arranged and underwritten by UK-based Goldman Sachs International, with work conducted by deal team members in multiple jurisdictions, who shared the revenue generated.

The SFC said Goldman Sachs Asia, the bank’s Hong Kong-based compliance and control hub for the region, had significant involvement in the origination, approval, execution and sales process of the three bond offerings.

The bank’s Asia hub had earned $210 million from the offerings, the largest share among the various Goldman entities.

“This enforcement action is the result of a rigorous, independent investigation conducted by the SFC,” said Ashley Alder, the SFC’s CEO.

The 1MDB bond deals were obtained for Goldman by its banker Tim Leissner, who in August 2018 admitted that he had conspired with Malaysian financier Jho Low and others to pay bribes and kickbacks to Malaysian and Abu Dhabi officials to obtain and retain the business from 1MDB for the bank.

US court documents show Low was rejected as a private wealth management client on several occasions as his source of wealth could not be verified, resulting in a potential money laundering risk.

Nonetheless, Goldman’s regional and firm-wide committees that vetted the bond offerings accepted Leissner’s false assertions that Low had no roles in the bond offerings without making further inquiries, the SFC said.

“Apart from the involvement of Low, there were a number of red flags present in the bond transactions which should have called for a closer examination of the corruption and money laundering risks involved,” its statement of disciplinary action said.

These included the fact that the amount raised far exceeded the actual needs of 1MDB, and the sovereign wealth fund’s willingness to pay high fees and repeated emphasis on confidentiality and speed of execution, the SFC said.


Fishing rights top Brexit talks agenda

Updated 30 November 2020

Fishing rights top Brexit talks agenda

  • A no-deal scenario is widely expected to cause economic chaos

LONDON: Last-ditch Brexit trade talks continued in London on Sunday with fishing rights remaining an “outstanding major bone of contention,” according to British Foreign Minister Dominic Raab.

EU chief negotiator Michel Barnier told reporters that “work continues, even on a Sunday,” as he arrived for the second day of talks.

Barnier had arrived in London on Friday following a spell in self-isolation after a member of his team contracted coronavirus and ahead of the resumption of talks with British counterpart David Frost on Saturday.

Both men warned that a deal could not be reached without major concessions from the other party.

There are only five weeks to go until the end of the current transition period, during which trade relations have remained largely unchanged.

The two key sticking points remain post-Brexit access to British fishing waters for European vessels and the EU’s demand for trade penalties if either side diverges from common standards or state aid regulations rules.

Raab told Sky’s Sophy Ridge on Sunday that this could be the final week of “substantive” talks, with time running out to agree and ratify a deal.

“There’s a deal to be done,” he said.

“On fishing there’s a point of principle: As we leave the EU we’re going to be an independent coastal state and we’ve got to be able to control our waters,” he added.

Barnier told envoys last week that London was asking that European access to UK waters be cut by 80 percent, while the EU was willing to accept 15 to 18 percent, according to a Brussels source.

A British official called the demands “risible,” according to the domestic Press Association, adding that the “EU side knows full well that we would never accept this.”

“There seems to be a failure from the Commission to internalize the scale of change needed as we become an independent nation,” said the source.

However, Raab was cautiously optimistic over the “level playing field” issue, saying “it feels like there is progress toward greater respect” for Britain’s position.

A failure to reach an agreement would see Britain and the EU trading on World Trade Organization terms, with tariffs immediately imposed on goods traveling to and from the continent.

As it stands, Britain will leave Europe’s trade and customs area on Dec. 31, with no prospect of an extension.

A no-deal scenario is widely expected to cause economic chaos, with customs checks required at borders.

Concern is particularly acute on the border between EU member Ireland and the British province of Northern Ireland, where the sudden imposition of a hard border threatens the delicate peace secured by 1999’s Good Friday Agreement.

The talks have already dragged on much longer than expected and time is running out for ratification of any deal by the European Parliament by the end of the year.